4. Mergers and spinoffs won’t alter virtualization, commoditization
and cloud architecture trends in hardware. Dell-EMC and Hewlett
Packard Enterprise may continue to struggle for sales growth
amid more competition from Lenovo. Cheaper servers are
growing at Amazon and Microsoft clouds.
PCs and tablets remain weak due to Asia macroeconomic
challenges. A shift in storage from networked systems into
direct-attach and solid-state drives hurts EMC and NetApp sales.
The transition to “hybrid” clouds may be slow.
6. Growth in public clouds from Amazon, Facebook and Google,
along with emerging market growth, will continue to commoditize
technology hardware. Many companies in these segments use
lower-cost, local or non-branded hardware made by Quanta,
Mitac and Sugon, relying less on Hewlett Packard Enterprise,
Cisco and Dell.
These trends, along with Lenovo’s cost-optimized presence in
servers, may boost competition and damp pricing and margins.
Branded vendors are turning to corporate clouds, which may be
slower to develop.
8. Software’s pervasion through hardware has altered servers
and is encroaching on storage. Virtualized servers mostly use
direct-attached storage with Seagate or Western Digital drives,
controlled by software from VMware, Microsoft or Citrix.
NAND-based solid-state drives are also gaining ground.
These models, and hyperscale consumers’ use of original design
manufacturers, will accelerate hardware commoditization, polarize
storage and reduce the use of costly networked storage from EMC
10. Microsoft’s Windows 10 has the potential to create a strong
PC upgrade cycle lasting several quarters. With an installed base
of 1.67 billion PCs, Intel estimates there are about 600 million units
more than four years old, which is one potential driver
The quality of Windows 10, and its relatively bug-free status
compared with prior versions, is another factor. Holiday shopping
in the U.S. and western Europe in 2H might provide a boost to
sales of newer PC models, after a seasonally weaker 1H.
12. Median trailing 12-month sales growth for the top technology
companies on a global basis, including hardware, semiconductors,
software and services are projected to expand modestly in 2016
to 9% from 8% in 2015, consensus data show. Across market-caps,
growth changes appear meager.
Software companies are projected to expand by double digits,
while many other groups including hardware and electronics
manufacturing hover at or below 5% growth. Large U.S.-based
hardware companies may remain growth-challenged.
15. Commoditization of hardware will continue to drive software as the
primary differentiator for technology companies in 2016. All sections
of the cloud -- infrastructure, platform and applications -- should see
greater spending as companies move away from a client-server
Greater demand for connected devices, along with increased
cyberattacks, may fuel more security software spending. A software
vendor’s ability to provide advanced analytics may become a key
distinguishing factor in the market place.
17. In cloud Infrastructure-as-a-Service, the gap between leaders Amazon,
Microsoft and Google and the rest of the market will likely widen
in 2016. The scale of these vendors, along with constant price cuts
should create greater barriers to entry for basic cloud compute and
This will force other companies to focus more on the hybrid cloud,
which combines public and private cloud resources and has higher
margins. However, in cloud applications, competition from legacy
software vendors may intensify.
19. The number and sophistication of cyber-attacks will likely continue to
grow in 2016. Consequently, spending on advanced security products
will increase 28% annually through 2019, according to IDC.
Greater use of connected devices in the workplace opens up
networks to more intrusions and companies will put greater emphasis
on security software at endpoints such as mobile devices. Large
tech vendors will likely continue to pursue acquisitions for advanced
21. The ability of cloud application vendors to provide advanced analytics
on their core products may become the single biggest distinguishing
factor in the year-ahead. Machine-learning and other advanced data
analysis methodologies are becoming increasingly important for
clients to better understand their user-base.
Rising use of Internet of Things products will also fuel demand for
analytics. Pure-play visualization vendors will likely expand their
product portfolio as competition increases.
23. The adoption of virtualization software in the network and storage
layers of data centers will likely accelerate in 2016. Server virtualization
growth rates have plateaued, prompting software vendors to target
other areas in data centers.
OpenStack adoption in data centers is also likely to increase and
threaten the margins of legacy vendors including IBM and Cisco.
Greater use of mobile devices for both personal and business use will
continue to drive the need for mobile-device management software.
24. Bloomberg Intelligence offers valuable industry and company data,
interactive charting and written analysis with government and credit
insights from a team of independent experts, giving trading and
investment professionals deep insight into where crucial industries
stand today and where they may be heading next.